Final Question Paper: Corporate Finance

Risk free rate is taken to be 4.69% while the market risk premium is 5.01%.

We are interested in obtaining the asset beta for Collinsville investment. Here from the reading material, we find there were altogether 6 chemical companies that produce sodium chlorates. They are Hooker, Pennwalt, American, Kerr-McGee, Brunswick and Southern. However, since we are evaluating the addition of a sodium chlorate plant, the two firms (Brunswick and Southern) who specialize in producing sodium chlorate are likely the best “twins”. To determine the asset betas of each company, we

You recently purchased a stock that is expected to earn 12% in a booming economy, 8% in a normal economy and lose 5% in a recessionary economy. There is a 15% probability of a boom, a 75% chance of a normal economy, and a 10% chance of a recession. What is your expected rate of return on this stock?

The comparable firm should exhibit similar business fundamentals in terms assets, business model, and risk. As such, we think that other major discount brokerages (Charles Schwab, Quick & Reilly, and Waterhouse) should be used as comparable firms to calculate equity and asset betas.

This four-credit course is for students who major in finance. By the end of this course,

1.What are conversion factors? Why were conversion factors developed? How do they impact on which bond is cheapest to deliver? Under what conditions would there be no cheapest to deliver? Explain in detail.

Suppose Ace, over the last few years, has had an 18 percent average return on equity (ROE) and has paid out 20 percent of its net income as dividends. Under what conditions could this information be used to help estimate the firm’s expected future growth rate, g? Estimate ks using this procedure for determining g.

year 2 is $23.64 or $33.64. In each case the market expects the firm to earn 10%

Also in exhibit 3, the average annual return of the 10-year Treasury bond during the same time period is 5.28%. Therefore, the spread between the average market return and the risk-free rate, or the equity market risk premium is 6.37%.

QuickBooks and Sage 50 Accounting are both great options for small business accounting. These programs help manage business finances which can drastically save time that may have been spent creating Excel spreadsheets and more. However, while both programs are sufficient for small businesses, the programs differ based on what they can offer your company.

13. According to these three scatterplots, three-year data and three-month data both show the beta of holding Under Armour shares should be around 1.22~1.23. However,

3. The expected return for each firm was calculated: Expected Return = Alpha + (Beta x BSE 500 actual return).

Which of the following is NOT normally regarded as being a barrier to hostile takeovers? (Points : 5)

In general the three-stage approach allows us to add complexity to the standard dividend discount models by enabling changing growth scenarios throughout the forecasting period: an initial period of higher than normal growth, a transition/consolidation period of declining growth and final a period of stable growth. The main assumptions are that the company on which we conduct the calculation study currently is in extraordinary strong growth phase. The time period with the extraordinary strong growth must be strictly defined and eventually be replaced with the declining growth assumption. Lastly, Capital Expenditures and Depreciation are expected to grow at the same rate as revenues. .

Johnson & Johnson and P & G stocks had the least volatility than the other individual stocks. But, regardless of Johnson & Johnson and P & G